It’s not surprising Amazon would use Prime Day this year to draw more attention to its grocery operations, since the e-commerce giant’s blockbuster announcement in June that it would acquire organic and natural grocer Whole Foods for nearly $14 billion is still fresh.
For Amazon, which has struggled to grow its Amazon Fresh operations, taking advantage of the immense popularity of the annual discount extravaganza and the buzz surrounding its Whole Foods purchase could be a perfect opportunity to make a statement about its commitment to grocery and lure people to its online food business, private label products and meal kits.
Even if the company has to take a loss of some of these services initially, the long-term benefit could be huge if Amazon is able to attract — and retain — customers to purchase food, beverage and other items from the online juggernaut. If it’s successful, Amazon could convince shoppers there is less of an incentive to go to their nearest grocery store, Target, Wal-Mart or discount retailer for food when they can have it delivered right to their door.
Other companies like meal-kit preparer Blue Apron, which went public on June 28 but has seen its stock price plunge amid concerns about growing competition from Amazon and surging customer acquisition costs, could be hit. And if Amazon continues to elevate many small to mid-size natural and organic brands or its own products, ot may cut into sales of mainstream grocery brands such as Campbell and Kraft Heinz. It’s unlikely Prime Day will permanently damage any of these companies, but it could be a telltale sign of what the future might hold depending on how well Amazon does and what products it discounts.
As CNBC noted, other traditional brick-and-mortar retailers such as Target and Wal-Mart will likely roll out their own deals to compete with Amazon. The irony of using Prime Day to target these and other outlets is that Amazon has yet to even tap into the potential synergies of having access to Whole Foods’ customer data and store locations to peddle its products and sell more fruits and vegetables.
Ultimately, Amazon knows a thing or two about customer acquisition, having convinced more than 70 million consumers to upgrade to Prime. For the company to succeed in the grocery business, it’s going to have to build scale and popularity for its services and products. Amazon Fresh, despite being a decade old, is available in just 16 cities worldwide. This year’s Prime Day could be a big step in that process. If its past success in retail is any indication, it’s primed for future riches in the grocery business, too.
Source: Food Dive